Lender lawsuit another hurdle for Alma Opera House

A lending company has filed claims against owners in the Wright Opera House development in Alma, asking for a nearly $2 million “bridge” loan to be repaid and initiating a foreclosure process against the project.

The complaint, filed in Gratiot County’s Circuit Court by Cinnaire Development Finance Management, an administrative agent for Develop Michigan Real Estate Fund, also asks that the court appoint a receiver to ensure the development retains its value through project completion.

Wright Opera Block, Freed Construction, C & R Electrical and project developer Kurt Wassennaar, who is the guarantor of the bridge loan, are listed as defendants.

Those liens have not been removed, and in the complaint Cinnaire asks the court find the lender as the preferred or “first lien” to be satisfied by judgement and possible sale of the property over the construction liens.

The project saw a year of inactivity until April of 2015, when former liens filed by contractors were satisfied, in part because of a six-month, $1.85 million community construction loan from Develop Michigan Real Estate Fund in March of that year.

The intention was to use a $1 million grant from the Michigan Economic Development Corporation as well as tax credits -both available upon completion of the project- to pay the construction loan, Wassenaar said.

March was later than expected on finalizing that financing, and that started a chain reaction of scheduling issues with contractors; compounded with unforeseen construction complications, the project fell behind schedule, Wassenaar said.

When the $1.85 million loan matured in September of last year, Wassenaar said he asked for an extension; instead, he said DMREF demanded payment in full.

“That essentially put a stop to everything on the Opera House,” Wassenaar said. “And it put a freeze on our ability to access high-level lenders.”

According to Cinnaire’s court filing, They demanded payment in full one month after the note matured, in October of 2015.

In January, Wassenaar made one partial interest payment of $60,125 according to those court documents.

On March 3, Cinnaire filed the complaint in Gratiot County, listing the total amount due as of Feb. 26 as 1.9 million, which included the principle amount of the loan, $46,404 in interest and $2,963 in late fees.

That amount does not include default interest accrued after Feb. 26, at a rate of 10.5 percent, according to the filing.

Cinnaire is asking the court for judgements of breach of promise note, foreclosure of mortgage and breach of guaranty.

The lender is also asking that the court compel Wassenaar to provide evidence as to why the action is not correct and to order the property be turned over to Cinnaire.

Finally, Cinnaire is asking the court to appoint a “receiver,” to ensure that the value of the property is maintained.

“The Real Estate and collateral are in jeopardy... unless steps are taken to secure them,” Cinnaire wrote in the complaint.

Those steps include authorizing the receiver to handle management of the property including paying taxes and insurance, overseeing the completion of construction and marketing and selling the finished product “To obtain max realization,” according to the court documents.

If Wassenaar is able to secure new financial backing, it won’t come to that, he said.

Admitting that finding lenders is more difficult when the property in question in a foreclosure process, Wassenaar said he’s none-the-less optimistic.

“It’s difficult,” he said, “But there are a fair amount of lenders who are interested in discussing it. The downside is the interest rates get higher. But that is the cost of getting this project done.”

Wassenaar’s plan is to secure a loan to pay off Cinnaire and DMREF. Once those legal proceedings are halted, he would then pay what is owed so far on the project.

Once the Opera House is clear of defaults and liens, the MEDC grant money and the tax credits are again available upon completion of the project, freeing up money to pay the new loan.

That could take just a few months, whereas a full foreclosure process could take a year or longer.

However, a fall opening of the Alma College apartments that are part of the finished design of the Opera House project is no longer feasible, he said.

An already tight project time line would have, before the Cinnaire complaint, put the development at completion just before the Fall semester began.

“So maybe by January if things go that way,” he said. “The financials are still good, all the entities involved are still motivated.”

He sympathized with contractors and other entities stuck in between the project and its financing woes.

“I”m deeply sympathetic to people who are stuck in the middle of this,” he said. “This has been an extraordinarily difficult project. We need to be patient and thoughtful.”

About the Author

Lisa Yanick-Jonaitis is a photographer and community engagement editor. She is a 2000 graduate of CMU, the mother of two boys, is terrified of birds and close spaces, and loves wine, music and gossip. Reach the author at ljonaitis@michigannewspapers.com
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